David Laws penned his thoughts about the Budget in the Telegraph yesterday, under the headline “Budget 2012: Not so much a gamble, more a grand strategy”

He writes:

Despite its scratchy origins, this was a strong Conservative-Lib Dem Budget, reminiscent of the earliest days of the Coalition at its best. It was radical and combined both enterprise and fairness. It did not duck difficult decisions or end up with lowest common denominator compromises. At times, the run-up may have looked like Coalition politics at their worst. I would argue that what resulted was Coalition policy-making at its best.

The Liberal Democrats challenged the Government to go further and faster in cutting taxes for working families. The largest ever increase in the personal allowance delighted our MPs, and will give real help to more than 20 million taxpayers. And the £10,000 allowance is likely to be delivered a year early – a big achievement for Mr Clegg.

But this was an enterprise Budget, too. From the Conservative side of the Coalition came much lower rates of corporation tax, with a new long-term target of 20 per cent. The decision to reduce the 50 per cent top rate will send a positive message around the world that Britain welcomes foreign investment, and at the same time the Lib Dems have contributed constructively to ensuring that the total tax contribution of rich people will be higher, not lower, than before. This is crucial to securing wider political support for the measures.

34 Comments

Why doesn’t David Laws just join the Tory Party and be done with it !!?

Writing in the Telegraph and praising the Tories for their Corporation Tax initiative, it was reminescent of John Redwood at his best. Go David, along with Clegg and all the other Orange Bookers and let the Lib Dems become a Party again of justice and fairness – a Party that Lloyd George, Beveridge and Keynes would be proud of !

“Mr Osborne will also have wanted to deliver a Budget for enterprise and growth”

And how is this growth to be encouraged – all Laws could identify wa sthe reduction in the Corporation Tax and the 50p tax rate. If he really thinks that will do the trick – then he certainly should join the Tory party, as I’m sure that the eulogies for George will ensure rapid promotion or is Keynesianism now officially dead within the LibDems.

@Tabman – ““Why doesn’t David Laws just join the Tory Party and be done with it !!?” – Because he is a Liberal, not a Conservative.

Is that it? Is that the sum total of your defense of the man? Come on, we expect to be hit over the head with some quotes from JS MIll, plus a good kicking from Hobhouse. You’re letting the side down, here!

NOT ONE bit of his final paragraph sounded Liberal to me. 20% Corporation Tax – a give -away to big business (not the small companies who really need a ‘leg up’) and reduction in the 50p Income Tax rate to, “welcome foreign investment” ! Which planet is he living on – obviously John Redwood’s planet ?! He has also swallowed (or does he really believe ?), the Tory line that the 50p isn’t bringing in the funds expected. You only have to read Richard Murphy at Tax Research, to realise the fallacies of that argument. When I saw Laws outside Parliament (with that awful Tory woman MP – whoever she was) on the Beeb Budget special – I thought, “there is not ONE iota of difference between him and the Tory (Tories)”. He should go and join them – as he nearly did 7 years ago ! I talked about Lloyd George, Beveridge and Keynes – I could just as easily have mentioned Grimond, Greaves, Penhaligon and Pardoe. Laws is no Liberal – well at least not one I recognise !

I know this is a blindingly obvious point but I think I’ll say it anyway: Namedropping however many notable Liberals you can whose attitudes you regard as being different to David Laws does not make David not a Liberal.

If Political Parties were goods they would carry this label: Members’ individual philosophies may vary.

Fair comment. But I’d like someone to tell me / us what Liberal tradition puts David Laws on the same ideological footing as John Redwood ?! I’d love to ask him. For goodness sake, he’s not even in the Government (well, at least not yet !), he didn’t even HAVE to defend the Budget ! He obviously believes it to be good. Even Vince C on Question Time last night was struggling with many aspects – and he has to support it. Can anyone tell me where David Laws differs from Osborne in what he’s said on this ? I maintain, that Laws is closer to them, than he is the MAJORITY of the Lib Dem Party. “Big Tent”, I suppose you’d say – well the Tory tent is bigger and ‘covers’ David Laws better !

BR – “But I’d like someone to tell me / us what Liberal tradition puts David Laws on the same ideological footing as John Redwood ?! ”

You really ought to go away and read the Orange Book.

But – given that I suspect you won’t, DL has spoken often of his embracing of Liberalism in all its forms, and that includes Economic Liberalism (which should not be confused with neo-liberal economics). His view is that you cannot have Social and Personal Liberalism without Economic Liberalism; its a view that I share and its one Redwood abhors.

Yes, David Laws’ Chapter in the Orange Book does set out his political philosophy well – it’s just that it’s not very different from Philip Blonds’, or David Willetts’, or Danny Finklesteins’, or Ed Vaizeys’, or Oliver Letwins’ etc etc – let alone, that man Redwood ! They’ve all got one thing in common …… !

You’ll see that when I equate David Laws with John Redwood it IS in regard to Economic Policy – the 20% Corportaion Tax rate and the reduction in the 50p Income Tax. I agree with you that Laws’ Social & Personal Liberalism views are very different from Redwoods’ (though not Blonds’ or Vaizeys’) – but he was commenting on the Budget (and he was the Coalitions first Chief Secretary), I don’t see a ‘fag paper’ (at the new Duty rate !), between what he and Redwood say – especially in regard to the Higher Rate Income Tax – and as for, “attracting foreign investment” …… well !

Jedi: “Redwood holds conservative views on social matters, being opposed to attempts to reduce the age of consent for homosexuality in both 1994 and 1999. He voted for the reintroduction of capital punishment in 1988, 1990 and 1994, and voted in favour of keeping Section 28 (along with almost every other Conservative MP in a whipped vote) in November 2003.”

OK, it’s from wikipedia, but he’s the polar opposite of David Laws on Social and Personal Liberalism.

Your point about what Labour should have been doing in the boom was of course one that Tony Blair made. But you miss the obvious point that we are not in a boom – where is the growth to come from now? I somehow doubt that reducing the corporate tax rate will have much effect when that sector is already running a substantial surplus. I also very much doubt that we will ever get the public sector defict down if the corporate sector surplus isn’t reduced. The budget contained fantasy fiorecasts for the growth in business investment – please tell us what is going to make that happen???

TBNGU – see my response to Jedi. Redwood is a Social Conservative and espouses some Economically Liberal views. Personally I think the two are unreconcileable – viz look at what Thatcher did.

TBNGU/BR – I judge ideas on their merit not on who espouses them. I couldn’t care less whether its John Redwood, Philip Blond, Tony Blair, Gordon Brown, Ed Milibland or whomever; It doesn’t make David Laws any less wrong if others you dislike choose to subscribe to the same ideas.

In difficult economic circumstances where demand is low, generating surplus cash is difficult to do. Therefore investment has to come from borrowing or shareholders. Its therefore crucial that interest rates are low (hence the need to manage the deficict; this is what keeps interest rates low) and there is the opportunity to attract inwards investment from shareholders.

Shareholders invest for two reasons:

– the possibility of an increase in the value of their holding
– a stream of dividend income

Companies have to pay dividends out of after-tax profits; hence a reduction in corporation tax increases the available dividend pool and creates more directly available cash for investment. Lower personal tax rates also reduce the tax paid on dividends, thereby making their receipt more attractive. Win-win.

I don’t dislike Tony Blair – and I can take his and your point that the Labour Govt should have been running a bigger surplus pre crash. Although, I don’t ascribe the crash to that cause but other factors. But I do know that what is happening now in this slump is a million miles removed from Keynesianism – and I don’t think this government/David Laws has much idea as to where the growth is to come from.

And while Laws suuports the removal of the 50p rate and probably its subsequent reduction to 40p like his hero George, perhaps I should point out that the base line figures used to justify the reduction were that income earned by high earners had recovered to its pre crash peak – so quite clearly we either not in it all together or the figures were fudged to justify a political end.

The crash was caused by other factors; namely an international (and local) banking collapse, by banks that were too big to fail and required substantial taxpayer bailouts.

BUT – the position was made far worse by Labour failing to prepare for the inevitable downturn. Brown/Balls’ “no more boom and bust” bubris; failure to address financial regulation, failure to mitigate a debt- and house price-fuelled boom; failure to reduce the structural deficit; failure to come clean about how spending was being financed by borrowing not revenues … I could go on.

Judging a policy according who the person defending it can be contrasted with is to miss the target completely – it’s not even playing the man without the ball, it’s playing the person who may or may not tackle the person without the ball – it’s a sterile discussion!

Laws talks about what is actually in the budget. He indicates serious compromises were made on both sides of the coalition. It was a business-like description of a business-like budget.

What he didn’t say was that the sums are robust, unlike Labour, whose general commitments so far are unfunded to the tune of £30bn.

Vince Cable offered the most illuminating response so far – he said it is not an ideal budget, but that it is a responsible budget. His underlying anger at Labour’s unwillingness to recognise the crisis they caused and their desire to return to the same policies which got us there has been palpable throughout.

I also have no problem with the view that Labour should not have gone along with the consensus for financial deregulation or have been so trusting of the financial sector and markets – but I think you will find that ex banker Mr Laws was a great advocate of financial sector regulation; and while Labour is learning that lesson I see precious little evidence of it from the current government, which to all intents and purposes has pretty much allowed a business as usual attitude. Given the inteconnectedness of the financial sector and the size of international competitors – I just don’t think that making banks small enough to fail and then allowing deregulation to continue is reallly a realistic strategy and would do very little to address the enormous structural problems we have with our financial sector.

What I really would like to take you up on is your view that the UK Corporate Sector is short of funds for investment and needs even lower Corporation Tax rates to encourage investment. You clearly do not look at many corporate balance sheets – the sector is awash with cash and the Corporat e sector is running a surplus that largely mirrors the deficit in the Public Sector. The reality is that the corporation tax rates cuts that it has been given have not encouraged further investment – what is needed is some maket demand together with more direct carrots and sticks to make the Corporate Sector to invest – more of the same current appraoch will just have the same impact. I’m afraid the Government and Laws thinking is just the same as that of the 1930s.

If it walks like a Tory and talks like a Tory then it’s a Tory,I would of said before may 2010 that laws was in the wrong party but the path the LD’s have took since then show he’s in the right one,thought the LD where better than this but given power they’re no different to the Tories or labour now,sad to see.

I’m sure it will show up in the National Income statistics (RED BOOK) which certainly used to do a sectoral analysis – but you can also look at the accounts of many major UK Corporates – not a few of whom are making exceptional dividends to repay capital that they cannot use (much of which of course goes overseas to foreign shareholders. But you can also get at the result by logic – the surpluses/deficts of the corporate sector, government , personal and foreigners have to net to zero. The personal and overseas part of that equation are largely in balance at moment and we know about the govt defict – so it is clear where the surplus is going.

“What he didn’t say was that the sums are robust, unlike Labour, whose general commitments so far are unfunded to the tune of £30bn.”

You may have a point that Labour doesn’t have a fully developed and detailed economic plan as to what it would do tomorrow – but to be honest it would be an act of political ineptness for any opposition to produce one at this stage. But as for the above statement it is just plain silly – it is quite clear tha t Labour would not seek to reduce the deficit as quickly as the Government are planning (and btw failing to do so). All commitments are by their very nature unfunded until the borrowing is undertaken to settle them. All you are really saying is that Labour would run a bigger deficit now in order to kick start growth in the economy – this is what Keynesians do in a recession.

The LibDems ‘claiming ownership’ of the budget appears like “joining a sinking ship”..Judging by today’s rushed out statement on alcohol pricing it looks like two of the ‘quad’ want to get it off the news agenda ASAP.

TBNGU – “This is not the same as saying that some small companies do not have problems with liquidity howver – but the overall position of the corporate sector is pretty clear.”

This is a telling point you’ve made, and I’m not sure you’ve realised it. It is, of course, the small business sector that will be the main engine of growth and getting us out of the mire – hence tax changes have to be favourable to them. The corporate cash surplus is a side-effect.

‘mf’.. branding the LibDems like the Tories or Labour won’t wash. Now no longer a Party of the Protest vote they set a far better example to the two old parties as to how to behave responsibly in Govt. The pupil premium, the massive rise in the income tax threshold, the clampdown on tax avoidance and the triple-lock gauranteed pension rises would not have happened with either an all Tory or a continuation Labour Govt.

You asked me a couple of days ago (sorry to have not got back to you sooner !), if I was, “against foreign investment” ? I’m not, but I just can’t understand Laws’ argument, that REDUCTION IN THE 50p TAX RATE rate, will, “send a postive message around the world that Britain welcomes foreign investment” !!

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